Tuesday, August 28, 2007

Gregory Clark and Adam Smith

Posted on Marginal Revolution in Tyler Cowen's Debate on Greory Clark's new book, A Farewell to Alms, Princeton University Press, August 2007.

I think we must distinguish sharply between the Adam Smith from Kirkcaldy who wrote Wealth Of Nations and the ‘Adam Smith’ from Chicago who didn’t and ‘his followers’, that is those who taught in American campuses in the 20th century who never read his books for themselves, but who believed versions of his alleged ideas in the form of popular quotations selected by their tutors (many, if not most, of whom hadn’t read Adam Smith’s books either).

Gregory Clark narrowly evades being lumped completely with the latter, but he is in the ante-chamber of accepting Chicago’ neoclassical version of Adam Smith care of George Stigler and Co. (See pages 145-6 of Farewell to Arms).

Smith did not say that ‘people everywhere are the same’ (a ludicrous statement – they are not even the same in the same family!). He said, as did Hume, that human nature is the same, within the range of possible varieties, and has been throughout the ages. Readings of Herodotus, Machiavelli, the Bible, Shakespeare, et al, show human characters that modern readers can relate to. Smith discusses some of this in his Lectures in Rhetoric and Belles Lettres (1762-3) published by Liberty Press. In so far as ‘material preferences and aspirations’ means anything, Smith said that the motive of ‘seeking to better themselves’ was endemic. This was not just narrowly about ‘material preferences’; it is in many things (natural elements causing humans to seek shelter, etc.,) where modern sets of ‘material preferences’ did not exist.

It wasn’t that growth was guaranteed given ‘given the right incentives’, as if the latter was a pre-condition for the growth. Smith explicitly rejected that notion in his criticism of the Francois Quesnay, who believed ‘perfect liberty’ was a pre-condition for opulence. Smith asserted: ‘ If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered’ (WN IV.ix.28: p 674). Hence, Greg’s statement, which melds with his, perhaps justified criticism of the World Bank and IMF economists (trained in, and practitioners of, neoclassical economics and also unread in Smith too), on pages 145-6 needs revision.

I am not clear where Smith in Wealth Of Nations ‘repeatedly explains’ poor performance in the pre-industrial world as a deficiency in ‘incentives’. If it does permeate the WB and IMF and econ depts, they did not get it, and much else that they preach, from Smith. His critique of mercantile political economy was that its foreign trade and colonial policies distorted the British economy (made it under perform in growth terms) because it provided the wrong (not ‘poor’) incentives (Book IV and chapter IX of Book V).

Being reasonably familiar with Smith’s historical approach, I am not sure where his ‘vision’ has been unconfirmed by empiricists. Greg has a narrow vision of Smith’s account of the revival of European commercial societies following the 1,000 year interregnum after the fall of Rome in the 5th century to the 15th century. Smith's Lectures On Jurisprudence and Wealth Of Nations clearly show his attention to elements of this revival, starting in nascent trade from small settlements and towns, mainly near waterways and coasts, and the country-town trade in agricultural and manufacturing products, and in the transformation of serfdom into tenancy farming. If ‘serious empirical studies’ contradict Smith’s actual analysis I shall need a great deal more convincing from Greg.

Commercial societies did not begin in 1800 (an arbitrary boundary, more of a Polanyi argument). They had a long history, linked to foreign trade and improving technology (think of the chronometer in long distance navigation which was proven in Captain Cook’s voyages; bookkeeping in Venice, and so on). Smith was the long-run specialist par excellence. His so-called ‘followers’ in US academe are epigones in this regard.